The troubled construction firm, MTD Walkers PLC, has transferred three of its subsidiaries to its Malaysian parent, MTD Capital Berhard, for a purchase consideration of little over US $ 19 million, to settle a debt payable by one of its subsidiaries.
MTD Walkers said the related party transaction was carried out on January 11, 2019. MTD Capital Berhard owns 90.78 percent of MTD Walkers PLC.
Interestingly, when the Colombo Stock Exchange inquired about the unusual trading activities in the MTD Walkers share, the company on January 17 said it had not engaged in any undisclosed price-sensitive business activities or transactions and was not aware of the reasons for the increase in share price or higher trading volumes.
The subsidiaries that have been fully transferred to MTD Capital Berhard are: Walkers Shipyards Limited, Northern Power Company (Private) Limited and Colombo Fort Heritage Company (Private) Limited.
A stock market filing said MTD Walkers reserves an option to buy back the shares of the three subsidiaries for the same amount under a call option agreement.
The company said the share transfer is aimed at settling an outstanding loan amount of US $ 19.09 million payable by its subsidiary, CML-MTD Joint Venture Limited, to Export-Import Bank of Malaysia Berhard, under a facility agreement dated November 26, 2015.
The Related Transaction Party Review Committee of MTD Walkers is of the view that the transaction is on normal commercial terms and is not prejudicial to the interest of the company and its minority shareholders.
The committee has also obtained legal opinion from an independent expert prior to firming its view on the transaction.
MTD Walkers lost over a billion rupees during the September quarter (2Q19) on heavy borrowing costs and dwindling revenues.
As at September 30, 2018, MTD Walkers had Rs.4.2 billion in long-term debt and Rs.23.6 billion in short-term borrowings.
The construction major has unfortunately become a victim of the delayed and non-payment of dues by the government for mega construction projects and the generally poor sentiments in the country’s construction sector.
According to the firm’s annual report, whopping Rs.22 billion is due from trade and other receivables.
ICRA Lanka rating in a report in September, last year, said Rs.6.0 billion is due from the Urban Development Authority to MTD Walkers for three housing development projects, which had already been handed over upon completion.